Mortgage, Part II

So today I had the meeting with the mortgage rep. We discussed my options, and determined that my best bets were an FHA loan for a condo, or a SONYMA loan for a co-op (FHA doesn't do co-op loans).

We began the application process, getting most of the paperwork ready for the underwriters. I still have to get a number of other things together. That list includes:

• W-2s from the last two years (apparently they want these to go with the tax returns)
• Paystubs (I gave them my last two, but my next one will reflect a raise, so I need to get it to them)
• Copies of my last two statements from all my accounts (including investment and retirement accounts)

Otherwise, things look good. I should get my pre-approval soon, and then it's off to start looking.

Applying for a mortgage

I'm in the early stages of planning on buying a home. With the tightened credit market, you can no longer get a realtor to show you around until you have a pre-approval letter in your hand. That means I have to start the application process.

The first step was figuring out where to apply. I considered going through a mortgage broker -- I know someone I could go to. That being said, there are plenty of fees imposed by the lender -- there was no reason for me to layer on fees from a broker. Instead, I compared rates myself -- I went to the websites of the major banks, as well as the locals for my area (credit unions included). I went to bankrate.com and checked rates. In fact, I've been doing this for the last several months (I knew I'd be buying this year, but I was nowhere near ready at that time), so I've been able to see who has consistently had the better rates.

I also have a ceiling -- I qualify for a mortgage through SONYMA, which is an FHA-like program for first-time homebuyers in New York. SONYMA's rates are set rarely -- it seems to be quarterly. So I know that at worst, I'll get the SONYMA rate (which is currently 5.5% for a 30-year fixed rate and 5.75% for a 40 year fixed rate).

So after all this research, I decided on three criteria for a lender. First, they had to offer competitive rates. Second, they had to offer FHA loans. Third, they had to offer SONYMA mortgages. I whittled the list down to a handful that met the criterion. On that list is the bank that I do my regular banking with, so it was a natural choice.

I have a meeting set for tomorrow with a mortgage rep at the bank (notably, my bank is showing once again why I feel they have very good customer service -- their mortgage office is about a mile from my office while the regular bank branch is two blocks away; the mortgage rep volunteered to meet me at the branch since it's more convenient for me). For the initial meeting, the rep only asked me to bring my last two tax returns. She said that we would go over what other documents I would need (I expect this will entail records of all my finances, as well as paystubs), and what my options are.

I'm kind of excited, and kind of nervous. I'll post tomorrow with what the mortgage rep says.

How I use Microsoft Money

I've said previously that I use Microsoft Money 2007 to manage my finances. Here's how:

I have the following accounts set up:

• Cash
• Checking
• Savings
• Credit Card
• Roth IRA
• 457
• Taxable Investments

These accounts are not "linked" to my actual accounts, and I use no automatic updates (other than stock prices). Cash represents the amount of cash in my wallet. Everything else is self-explanatory (though for those who don't know what a 457 is, it's the equivilant of a 401(k) for those who work for municipal governments). Many of these contain composite balances -- for example, I have two different checking accounts with different banks, but the balances are combined in my "checking" account in Money.

Now you may ask why I don't use automatic updates. There are two reasons. First, if I used automatic updates I would have to maintain separate accounts for my various accounts, including for several credit cards that get used for different things. Second, and I think this is the more important reason, by requiring myself to enter everything manually, it really requires me to look at my spending. It's too easy to allow automatic updates to fill everything in, and then look at totals spent in various categories. Doing everything manually results in my looking at my spending when I spend the money, when I enter it into Money and when I look at my spending by category.

On my Money home page, I have the option of selecting specific categories to track, and assigning them a monthly budget. I use that to track my two largest discretionary spending areas -- groceries and dining out. With my current living situation, I tend to eat out a lot. But that's a whole different post.

My Current Financial Picture

Here's a snapshot of my current finances:
Cash: $7,296
Stocks: $2,710
Bonds: $300
Retirement: $8,658
Student Loans: ($119,369)
This gives me a net worth of ($100,405).\

To track my finances and expenses, I use the following:
Microsoft Money (Home and Business Edition) (I have the 2007 edition) and Networthiq.com. In another post, I'll discuss exactly how I use these tools and how I budget.

Welcome

Welcome to my blog. I'm a lawyer in my late 20s. I have a job with a local government in the New York Metro region. Over the last several years, I've come to learn that personal finance in the 00's is vastly different than anything my parents had to deal with. Moreover, I learned that neither my parents nor school prepared me for the financial realities I've had to face since leaving school.

I've spent the last few years learning what I can and trying to fix up my financial picture. I'm starting this blog because I figure public accountability, even the anonymous kind, can help me take that next step forward. If I can help someone else with some of the trials and tribulations I've gone through, even better.